YouSaid · the spoken record

Bob Elliot

lines on the record: 70
first: 2024-11-08
most recent: 2024-11-08
sittings or episodes: 1
sources: podcast

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“Yeah, for sure. If you want more of my regular flow of hot takes, usually with slightly less profanity, check out my Twitter feed at Bobby Unlimited. I also have a YouTube where I have a variety of clips that from my various media appearances. That's at Bobby Unlimited. And new just this in the last few weeks, I've started a TikTok channel where I do morning rundowns of what I'm seeing in the markets. No dancing yet, but it'll get there. And that is also at Bobby Unlimited. So if you're into TikTok or have a Gen Z friend, family member.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Oh man, you're free shooting to the choir. Somebody that attempted badly to be a value investor a long time ago then saw the light and decided to never fight the Fed again. You're preaching to the choir.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Pushing the markets in a certain direction, you can't get sanctimonious about valuations in that sort of environment. If you look back through time, and I've spent more time studying more bubbles than I'd recommend anyone do in their entire life, bubbles persist until there is a meaningful tightening of financial conditions, typically by the central bank. You might think that U.S. stocks are in a bubble. You might think AI is a bubble. You might think PEs are too elevated, all of that. And it doesn't really matter because as long as easy money persists, the bubble or the elevated valuations will persist. Someday that'll change, but not in the near term. And so. If I see another chart of showing that stocks are overvalued, Just delete that. It's actually harming you to look at that chart.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Look, Trust me, I grew up in dividend discount models, cash flows, you know, PEs mattering, valuation, careful study of the internet bubble and how unreasonable it was. Nonetheless, when you have a set of monetary and fiscal momentum.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well said. Bob, last question here. You always have some hot takes that you put on Twitter, and I always appreciate them. I just want to ask you for what is your final hot take or sage advice for those that trade or look at macro as it stands today.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Like having lived through the financial crisis in 2008, I can tell you that it ain't close. Like we are nowhere near what it felt like in 2008. And yet the level of aggression in terms of easing is roughly the same. And so you look at that and you say, does that make sense? No, that's a global over-easy approach that we're seeing pretty much everywhere.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Canada's, you know, uh, easing aggressively, probably more appropriate given their underlying domestic economic circumstances, but still easing aggressively. The ECB is easing aggressively, despite the fact that unemployment rate is at multi-decade lows and services inflation is elevated and wage inflation is elevated. So they're delivering an easing. And you add it all up. And it's actually pretty amazing. Like the amount, the number of central banks that are cutting interest rates today and the amount of cuts that are happening today. The last time this happened other than the very acute March of 2020 period was the middle of the financial crisis, October 2008.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Inflation problem persisting. And then really, if you look elsewhere, I mean, everyone's cutting and everyone's cutting pretty aggressively, like China is doing basically whatever it takes on the monetary side to support their economy. They still have a lot of effort on the fiscal side that's needed in order to actually deal with deleveraging that they're happening, but they're easing the Bank of Japan. There's all the speculation they were going to tighten aggressively. I mean, I'm going to be dead by the time the Bank of Japan tightens aggressively. I've been doing this for more than 20 years and still no aggressive tightening from the Bank of Japan and no reason for them to.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Alternatively, having grown up in Detroit and only as a kid allowed to watch PBS and CBC, I have an unusual familiarity with the Canadian economy and experience. There you go that I still enjoy. But I think if you just take a step back around the world, I think we're basically seeing the same sorts of overly easy policy dynamics pretty much everywhere. Like today is a good example, actually. The Bank of England comes out and says we're going to push off the timeframe for which we think until we think inflation is going to meet our mandate. But don't worry, we're cutting, right? It's like the same thing, right? You know, they easily could have been in a circumstance where they saw that set of conditions and said, let's just slow this down and not ease. But they continued. Despite”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Remember, the US is in fact the best economy in the world. And so we should just talk about the US because it's the most important. Well, I mean, point two.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Obviously, we've had a pretty domestic perspective on most of this conversation in terms of the US, but is there anything that you're seeing in terms of emerging markets, opportunities there or thoughts there from a broad base there?”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, yeah, FX carry trades, you know, offer the same risks, let's say, and obviously many people learn some of the challenges of that in August and, you know, are looking their wounds as a result.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, credit spreads, you know, we have a circumstance where continuing to run over easy monetary policy is supportive to, you know, keeping the rate of defaults low. But at the same time, you're not getting compensated much for them. And so what I see is that mostly what's happening is that Crystal Spread investors are But that's a dangerous place to be. Take it from someone who lived through, you know, 2006, 7, and 8, like levering up to the gills on credit spread risk at secular tights. You know, it may not screw you today. It may not screw you tomorrow, but there will be a day when things reverse and you're probably going to be caught without pants on when the water goes out, when the time goes.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“When you talk about bonds being, you know, just to put it lightly, a bit of a mess these days, it feels like mostly that's the duration side, but there's obviously the credit side. Is there any space for, I don't know, like just like corporate credit, either like high yield investment grade there? Because, you know, when I look at credit spreads there, obviously they're like just incredibly tight. Is there any spot for that on that side? You know, if you can just like the duration hedge it or something like that.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Bonds will not do well in that sort of environment on a relative basis. And one of the benefits of holding stocks and gold is you don't actually know whether the overly easy policy will run essentially to non-productive hard assets or whether it'll stimulate nominal growth. You're not really sure it's hard to know. And so holding that package of stocks and gold together is often a better package to be holding in these environments than just holding, for instance, stocks alone or gold alone.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Well, I mean, I think basically what we've seen, the question outstanding 10, 15 days ago was from a fiscal policy perspective and a monetary policy perspective, were we going to have an affirmation of over easy monetary and fiscal policy or were we going to have some indication that that was likely to be dialed back, you know, given the electoral realities and maybe Chairman Powell expressing some hesitation about the existing path expected. And the answer is we basically just got total affirmation on both accounts, which is we're going to run over easy fiscal policy ahead and we're going to run over easy monetary policy ahead. And those sorts of circumstances, you know, while it's kind of unusual, it's not unheard of. And it's, you know, it's pretty straightforward how this works, which is stocks and gold typically will do well in that sort of environment.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, agreed, agreed. Okay, so within the context of everything we talked about, I want to get into asset allocation based on those perspectives. You know, maybe starting with just equities, bonds, and gold would love your high-level perspectives on your outlook on those three asset classes, how they interchange within a broad-based monoportio, and just your broad outlook there.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Could they cut $2 trillion just for in terms of orders of magnitude, discretionary spending is $1.7 trillion and half of that is military spending? So like could they cut $2 trillion? Like no, like not, you know, that's a, I put that in the totally implausible camp. You could see a circumstance where there's efforts made to increase efficiency in the existing bureaucracy. I'm certain that there's plenty of things that could be done to increase the efficiency there. But the impact, the macro impact of those things is like, you know, orders of magnitude less than the campaign rhetoric. It sounds great. We're going to cut $2 trillion out of the deficit. And it's like, okay, so when are you stopping the social security checks? The answer is like, it's not going to happen. That's just the reality.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“My last question on just the fiscal situation and potential electoral outcomes from this juncture is obviously there's a lot of talk about trying to decrease government spending, decrease deficits, you know, basically increasing efficiencies, bringing in Elon Musk to just cut the bloat, basically. When I look at the actual government spending, it's so much of it is like defense, social security, interest payments. Do you see any of that efficiency that, you know, they're talking about cutting like two trillion dollars do you see that as like even possible?”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, they certainly could provide targeted liquidity if there was a specific concern. I kind of look at that. Those are just all different flavors of QE. It depends on exactly the mechanics and stuff like that. But the short story is it's just an example. The Guilt crisis, so to speak, is just a good example of the fact that when there's a material acute problem, the central bank has unlimited ability to constrain the rise in bond yields. And so this idea that we're going to go to 15% bond yields, let's say when the economy, when nominal growth is 5%, like it's not going to happen because the Fed's just not going to let that happen.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Yeah. It feels like it's sort of just the maybe the political will, is it? You know, like you're talking about basically QE, which has become a dirty word at this juncture. But, you know, I think a bit about, you know, what the Bank of England did with the Guild crisis, where they came in with a localized facility that was somewhat temporary and sort of orthogonal to the monetary policy. Like they were about to start QT the week after was their current intentions. And they actually did. But they had this temporary program and then they unwound it later on. So do you feel like that's something that the Fed would be okay with doing, say, I don't know at some random time where even though they're hawkish from a policy perspective, they come in with a localized facility like that.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“You know, when the chips are down, you can buy, the Fed can just buy the debt as a monetary policy tool. And they can essentially buy an unlimited amount of debt. Again, only constrained by the currency. And even then, there's a question about how constrained they are. I mean, just look at Japan. They've basically bought all of, you know, they bought 50% of the outstanding government debt market that is multiples of GDP. And like, what's the problem? Like, yeah, the yen's down, you know. which is a good nice for macro trading but like if someone's standing in tokyo really like feeling a terrible outcome as a function of that”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“And we should also remember that if we had a circumstance where the yield curve steepened. A way that was inconsistent with underlying macroeconomic conditions The Fed has the ability to buy an unlimited number of treasuries, right? And so you could have if foreign buying wasn't enough to fund higher deficits and higher domestic buying as yields rise wasn't enough and the treasury cutting its duration supply wasn't enough.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think that's a good answer. That's sort of what I meant by asking do you worry about it? Because, you know, the hypothetical worry is, okay, do definitives keep blowing out to the point that buyers stop showing up for long-term debt and we see something like a failed auction. Obviously there's mechanics behind that that pretty easily solve those. But that's like the doom scenarios. Like what if we get a failed auction at the treasury? But obviously there's a lot of tools behind that.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“And you see those rates rise and it's starting to hit the stock market, that moral outrage that we're seeing expressed as they said on the outside may become a policy norm, particularly, I mean, like, look, it's a politicized seat. in a highly political administration. And so my guess is. The context of the US being the outperformer, it's just probably not a big risk in certainly in the medium term, maybe eventually to be a risk, but not in the medium term.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“And the reason why that is a couple fold. One, just remember the U.S. economy is the strongest economy in the world, in the developed world, and has the highest interest rates on the long end and actually is getting a lot of demand from elsewhere in the developed world for higher yielding U.S. debt. And if US debts rise, that will likely incentivize more demand, not less demand. That's number one. Number two is if we get into a situation where yields are rising to the point where they start dragging on the stock market, it's important to remember the treasury has the authority and the flexibility to cut duration supply. And while members of the Trump administration or members of, say, Trump affiliates have been quite negative about the efforts that Janet Yellen did to constrain duration supply over the course of the last couple years. Once you're sitting in office.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“I don't know what you mean by concerned. I mean, will deficits be larger? Yes, deficits will be larger. Will that lead to greater financing needs from the government for sure? It'll also lead to stronger growth. That on the surface should combine to put an upward pressure on long-term interest rates. Now, I think the question is how big a pressure will that be on long-term interest rates? And in particular, will that pressure be large enough to create a monetary tightening that offsets the fiscal, the positive fiscal impulse, as well as the monetary easing that we're seeing on the front end? And there, you know, my guess is that the beta to those increased deficits and issuance is probably going to be lower than many sort of folks who doom about the long-term U.S. bond market will suggest.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, that's fair. I guess one of the big things people worried about right now is fiscal deficits. And, you know, they look at the two potential electoral outcomes of, you know, Kamala versus Trump, and they both would likely increase the deficit Trump possibly more. We got the possibly more outcome. And so now there's continued discussion of what is the impact of that on potential deficits. So, you know, just the first question on that regard is a simple one, which is, are you concerned about fiscal deficits?”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Tightening choice from their original moves through this period because inflation started to come down. My guess is if they were faced with that choice, they would use more balance sheet, more aggressive balance sheet consolidation in order to tighten policy. But we haven't, it hasn't been tested.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, but that I think comes to the fact of probably two things. One, overstating what the impactfulness and restrictiveness of interest rates are. And so I think they didn't, there's a disagreement, I'd say, between certain people who have one view of the world in terms of the impactfulness of interest rates at five and a half versus the Fed viewed as much more restrictive. I think combined with the fact that to some extent the Fed got lucky in the sense of they got unlucky that the supply chain issues caused a lot of inflation. And then they got lucky that the resolution of those supply chains created a lot of disinflation. And so plus oil prices falling. And so, you know, they were never challenged on the quantitative tightening front. They were never forced to make the addition.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I guess I just feel like the measures are almost like half measured, you know? Like, I think about quantitative tightening and the approach that they took there about just like letting it be passive roll-off versus active selling. It feels like at every juncture, they never really have the true willingness to do what it takes. They try to talk like they do, but it feels like in practice it's sort of opposite.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Is the Fed committed to executing on that and using those tools if they need to in response to elevate inflation? What I'd say is the indications, at least the Powell Fed, the indications are that there is a willingness to take steps, make an effort to combat inflation. I think we can disagree on how aggressive they need to be and whether they're prematurely easing. you know we certainly have seen and you know seen a willingness to uh to tighten in response to those pressures if they were to emerge again”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“I mean, I think the fat is every tool imaginable. I mean, has all the tools that they need to constrain inflationary pressures if fiscal policy is too expansionary? The question is, do they have the fortitude To do it. Like, that's the only question. I mean, as a simple example, the economy can, if the economy's running hot, it's very easy to slow the economy, just raise interest rates to 10%. And if that's not enough, raise them to 20%. This is not an impossible task or, you know, cut the balance sheet in half in a year, right? These are not impossible things to accomplish. The question is.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, that is a doozy. So, okay, you know, we can, we can, there's no point really debating the semantics of how powerful that fiscal impulse will be. But I don't know if we just say on a scale of one to 10, you know, if you take Trump's views at face value when we call that like a nine out of 10 on the fiscal impulse scale. So if we just dial it back to say like the impact of like, I don't know, four or five out of 10 or something like that, if that occurs, do you think that the Fed and monetary policy has the correct tools to tame inflation within that context of like continued fiscal impulse? Or do they get to a point where it gets really hard to even like wrangle that?”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Well, I thought one of the more interesting conversations is at the beginning of the press conference was Chairman Powell basically outlined and making very, very clear that perspective policies from a new administration has zero impact on the Fed's actions until those policies are approved and implemented and have influence on macroeconomic outcomes. So just think about that. What that means is that, and there's a lot of people, a lot of people in the pundit class here in the macro pundit class who will say because Trump's coming in, it will have an influence on the Fed. I just want to emphasize it will have zero influence on the Fed until the policies are actually implemented and have a macroeconomic effect. What that means. I think it's very important we're in a time”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, that's fair. I'm curious about what you think in terms of the dichotomy moving forward between the impact of monetary policy in the face of basically a non-gridlock congress and a highly impactful policy like new policies from Trump. So it feels like the big debate is what can the Fed really do in the face of that? So if Trump comes out and with a fully read Congress and decides to implement tariffs, et cetera, tax cuts, like how much power or like strength or stronghold does the Fed even have on impacting the economy in the face of just, you know, maybe believe that's fiscal dominance, maybe not, but just curious your thoughts.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Is totally aligned with that perspective. Now, what I'd say is, you know, it's the reality is probably more ambiguous than what Chairman Powell said in that press conference. And so, you know, it's important to recognize that, you know, just because he says that the executive can't do certain things doesn't necessarily mean that that's either true or false.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“I think Chairman Powell comes from sort of a long line of orthodox views of the Fed, and that is that it's an independent agency that is non-political and he's made a heck of an effort during a highly politicized environment to by and large make no comment on political matters at all. And, you know, his statements today, particularly in terms of like pencil being reticent, I should say, to pencil out perspective policy implications of a new administration all align with this idea of, you know, affirming the Fed as a non-political entity, you know, I think the emphasis that the Fed is independent and that once someone is confirmed, they're in the seat regardless of the desires of the executive.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Okay, so the last major bucket of themes that I saw from the press conference was obviously we're recording this within the context of a major U.S. election that just occurred. Trump won, highly likely it's going to be a red sweep in Congress. And so there was naturally a few questions asking basically about what would be some hypotheticals of, say, if Trump asked Powell to basically resign before his term ends and also asking, you know, what would happen if Trump tried to basically demote different Fed governors or vice chairs, et cetera. And he was the most resolute I've pretty much ever seen him in just batting that down. What were your thoughts about that? And what are the implications? Because, you know, as I saw as I was occurring, I started to see that long bonds started to rally a little bit. It felt like, you know, the markets were feeling a bit good about this just being resolute about Fed independence. What did you think?”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Or close to it, depending on your measure. Therefore, there was no inflation pressure back then from labor markets. So there must not be inflation pressure today from it. And the problem with that thinking is it misses the fact that prices have gone up 30% in the last four years. And so labor market conditions at the same level of tightness today have a totally different perspective in terms of what is appropriate nominal wage growth to maintain real purchasing power, totally different perspective than it was in 2019. Now, why he doesn't see the difference between wages today and pressure on wage growth before? I don't know. But today, nominal wage growth is 5%. That is very high unless you have extremely high productivity growth and most likely creates structural inflationary pressures that will keep inflation. Above the Fed's mandate.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“In part because he doesn't see any risk on the inflationary side of things or de minimis risk on the inflationary side of things, even despite cuts. And so I think that general consensus, like from a level of labor market, I think mostly most people are aligned, most reasonable people are aligned with that view. I think the thing that is a real interesting question is, is the strong labor market supportive to inflationary pressures? And I think there's a meaningful disagreement where what Chairman Powell's thinking is to look at level indicators as they compare to level indicators in 2019, which is a time when the labor market was strong, but wage growth and inflation was at target and say, hey, look, we're at the same sort of level as we saw at that point in time.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“First of all, from a level perspective, I'm old enough to remember when 4%, 4% unemployment rate was considered a very strong labor market or where prime age employment being at 25-year highs means that the labor market's pretty strong. And so, you know, I look at those numbers and I say, yeah, we've gone from where we were in 2022 and early 2023 where the labor market was like incredibly hot, like red hot to a labor market that is strong. And to be clear, Cherokee Powell in the meeting said the labor market is strong probably a half dozen times. So it's not like there's a disagreement about the fact that the labor market is strong. What he's saying is that he wants to maintain a very strong labor market.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“To just quickly touch on the labor market side of things because that feels like something that he's really hanging his hat and, you know, basically the Fed put seems to be struck underneath the labor market and he's really owning that. So, you know, you've been, I've seen you post this weekly thing of, you know, the labor market is secularly tight. And then you eventually, a couple months ago, shifted to it's no longer tight, but it's not obscenely cooler anymore like that. So I'm just curious again, like your high-level perspective on the labor market and whether this, you know, just aggressive Fed put that struck underneath the labor market, is it warranted at all? What are they missing that you feel like is not warranted for that?”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“I would not say that. And the reason why I wouldn't say that is I think if you could crawl into the recesses of Chairman Powell's mind, I believe that he believes that inflation is beat and his soliloquy today about all the reasons why inflation is actually 2%, despite printing at 2.7% on a year-over-year basis, I think is like an indication, like a site into his end of his, you know, of how he's thinking about inflation here. And so the question is what will shake him of that belief when you see things like this, you know, a lot of confidence, let's say in a particular view, it typically takes a lot of information to the contrary. You know, we saw that during transitory. I mean, how much data did Sharon Powell need before he finally gave up on the”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“That much as an investor because you trade the markets and the policies that are in front of you, not the markets and policies that should be pursued. And obviously that influences what you think probabilistically, what should be done or what is the orthodox approach often influences you in terms of what you guess the policies policy response will be. I just emphasize on mid-September last month, the Fed rewrote the reaction function. The reaction function is despite a strong economy, cuts are coming ahead and that there is no inflation and that that's a reaction function that they have and are holding and until I see indications that they choose to change the reaction function, I'll assume that they'll continue to pursue it that way. And today was further confirmation of that view.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“I think prudent monetary policy in this sort of circumstance, to be blunt, would be to do nothing. And if you look back through time, if I just plopped you in a normal economy and I said, look, growth has been roughly a potential for a couple years. Inflation was very high and is still a bit above what the mandate is and unemployment rate is low and interest rates have basically been at this level for a couple of years. What would you do? My answer would be, you know, neutral, maybe even tighten a tad because inflation is above target. And yet, you know, the Fed has chosen an unusual but not unheard of path with the over-easy path. In some ways, it doesn't really matter.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“It's really interesting. It feels like there's a lot of counterintuitive things going on. And I just think about the context of a great report that our mutual friend Andy Constant put out about just like breaking down what, you know, we've been talking about what is likely to occur that the Fed is going to do, but I want to shift a little bit to like what we think they actually should do somewhat and just talk a bit about that is that, you know, he wrote out that this thesis that to get control of the long bond, they need to come in more hawkish and that would allow that to settle down. Now, obviously we talk about what they're doing on the Fed funds, right, in terms of lowering interest rates, but when you look at the context of what's been going on in the long bond, which is where most of the borrowing and lending of the economy occurs, there's actually been a somewhat of a tightening of financial conditions there. So perhaps we get into this world where, I don't know, the Fed is more hawkish, but that actually eases in a way. And these weird dynamics like that, I'm just curious, like, how do you think about all of that? And Andy's piece in the context of what do you think?”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“They'll say that they've gotten the level of reserves and balance sheet size back to roughly where they want it to be. And then they'll stop. The thing that's interesting about that is it will likely compound the easing Dynamic already at play because if you stop selling assets or effectively selling assets, they're rolling it off. But the point is the same, which is if the Fed is holding less duration, stops slowing the amount of duration or stops reducing the amount of duration that they're holding, that is on the margin stimulative. And so it'll probably be an additional point of simulation, not huge, but just tack it on in as another indication of this over easy monetary policy.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Chairman Powell basically and sort of the Fed orthodoxy is that balance sheet rolloff has no impact on monetary conditions. And when I say no impact, I mean like literally there are papers written by the Fed that suggest that quantitative tightening has no impact on the economy and that is crazy. And the reason why that is is because the selling of bonds or the reduction in the holding of duration by the Federal Reserve is an asset sale and any asset sale should have an expected impact on asset prices in general. And so I think basically the Fed has every intention to just sort of quietly reduce the balance sheet, let QT run for a little bit. And in the next couple meetings probably.”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, I mean, I dream of the day when, you know, the Finn Twitters get a seat in the room. And then we can have like a rotating rotation of which one of us gets to ask a question. I don't think that's going to happen anytime soon. But yeah, I was surprised. There's basically no conversation about the balance sheet. I think in part because from the Fed's perspective”
2024-11-08 · Forward Guidance · Biggest Takeaways From The Fed Interest Rate Decision | Bob Elliot · IDENTIFIED FROM THE TRANSCRIPT